Premier Morgage Miss Sold Insurance

Sp3no

Hello, i was hoping for some help with a bit of news from our morgage advisor which has come as a bit of a shock.
We used Premier morgage services to find us our first morgage, the arrangment with the fees were that we take legal and general house and indemnity insurance out for a year and they get their commision this way. 12 months have past now and we soon realised we were paying over the odds, our insurance payments were £60 a month, we have just got ourselves a new quote of £10 so switched insurance right away. The shock news is that the morgage advisor has contacted us saying we should have held the insurance for 36 months!! and they will be invoicing us over £1000 for loss commission. We were never aware we had to pay above the odds for 36 months and cannot find this in writing anywhere. They have given me 2 options.

1.They will take the insurance out again for the remaining 24 months and we pay as we already have
2. They invoice us for just over £1000

I dont know what to do, im thinking a 3rd option may be worth discussing and thats telling then to
3. Sod off :rotfl:

But seriously what can i do. So far i have been told to ignor it as they cannot persue this?

What do you think

Many thanks in advance. :T

GMS

Sp3no wrote: »

Hello, i was hoping for some help with a bit of news from our morgage advisor which has come as a bit of a shock.
We used Premier morgage services to find us our first morgage, the arrangment with the fees were that we take legal and general house and indemnity insurance out for a year and they get their commision this way. 12 months have past now and we soon realised we were paying over the odds, our insurance payments were £60 a month, we have just got ourselves a new quote of £10 so switched insurance right away. The shock news is that the morgage advisor has contacted us saying we should have held the insurance for 36 months!! and they will be invoicing us over £1000 for loss commission. We were never aware we had to pay above the odds for 36 months and cannot find this in writing anywhere. They have given me 2 options.

1.They will take the insurance out again for the remaining 24 months and we pay as we already have
2. They invoice us for just over £1000

I dont know what to do, im thinking a 3rd option may be worth discussing and thats telling then to
3. Sod off :rotfl:

But seriously what can i do. So far i have been told to ignor it as they cannot persue this?

What do you think

Many thanks in advance. :T

This highlights some of the ways 'fee free' advice is paid for.

A mortgage broker has costs to cover which are not always covered by the commission from the lender. This is why broker fees often apply.

One way to offset the lack of fee is to arrange insurance and get commission from the provider. This could open up the possibility of an expensive policy being sold in order to recoup the fee which was waived for the mortgage.

This sounds like your broker has had the commission paid up front and has now been subject to a 'clawback' from the provider. Whilst this is part and parcel of the business your adviser is obviously feeling like you have gone against the agreement which meant you paid no broker fee.

I do not see how you can be made to keep the insurance but if you had agreed to the deal then the broker may threaten to pursue. Did you have any agreement in writing?

This demonstrates that free advice is not necessarily good advice, and that there is no such thing as a free lunch. Unfortunately it also demonstrates practices which can go on which some may view as immoral.

Which is better, good advice which costs a little, or free advice which is poor?

Sp3no

Thank you for the quick reply :j
I remember it vividly the conversation we had where he said we would have to keep the policy for 12months. I really cannot find anything with a signiture on that states i was tied into a 36month agreement this is the reason i am thinking that they are trying it on?? You are spot on with the up front fee bussiness as the broker informed me that Legal and General had paid upfront and then tried to claim it back? Thing is the cheapest quote we could get was with Legal and general so we are still with them just paying £50 less for the same policy :beer:
Im going to ignor them till they put something in writing, then i have a paper trail. A friend who i currently using a morgage advisor asked them their opinion on our situation and the advisor told them that they were trying it on and that they cannot persue this in court?

GMS

I cannot seehow you would be forced into continuing the policy.

You have received 'free' mortgage advice yet you have paid £50 too much for your insurance x 12 months, so you have paid £600 over the odds (your figures).

Had the broker said to you there was broker a fee (for example) of £295 would you have paid it?

If you had you would have been £305 better off.

This obviously does not take into account any differences (if any) in insurance cover.

It does however highlight the potential pitfalls of 'fee free' advice.

dunstonh

The FSA does allow commission to offset fees and for you to become liable for any difference if there is a clawback. However, it has to be done correctly and many tied agents or less scrupulous reps dont do it.

The correct way is
1 - agree a fee. The fee should not equal the commission (unless it is very rare that it just happens to be exactly the same as the published fee
2 - Commission only to the amount of the fee should be taken. No more than that.
3 - If a clawback occurs you are only liable for the difference in the amount received or net amount and the fee you agreed. Not the whole original amount.

The fee can only really be enforced if there is a fee agreement that states you agreed this method of remuneration. Typically these are signed by you.

if a fee wasnt agreed and they kept all the commission or the commission was greater than their fee option and they are now trying to claw back the lot from you then they are on thin ice and you should consider a complaint.

Before you complain though, ask them for a copy of the fee agreement you signed agreeing to those terms. If there is one, then they have you. if they cant produce one then you are in the driving seat.

Senior_Paper_Monitor

Have a look for a 'client agreement' / 'fee agreement' (or similar) which you may well have been presented at the beginning of the sales process. This may well contain an agreement for what they are enforcing.

I know our standard network document contains such a clause for certain insurances (having battled with them to remove it - they don't normally permit changes to this particular document - as I consider it an unreasonable clause and one we would not enforce).

If it is in there it will be enforceable - up to them whether they choose to. BUT it is normally to cover clawback of commission paid over a term (usually 2, 3 or 4 years) such as life, critical illness etc and not for annual policies like life household insurance, medical insurance etc which is always (as far as I am aware) annually renewable.